Rio should read this ! copper remains the key metal in electrification. The missing link toward net zero? The power grid
Moving away from fossil fuel use entails greater levels of mass electrification, says analyst James Cooper. Adobe Stock/Urban Stebljaj/Svetlobne iluzije
BY: JAMES COOPER NOVEMBER 24, 2023
Electric guzzling EV’s, trucks, trains and buses will soon move billions of people and cargo around this planet each day. So, what’s the best strategy to play this multi-decade investment theme?
Commodities tied to solar panels, wind turbines, or nuclear plants — does it really matter?
Whichever technology political leaders select, ending fossil fuel reliance means mass electrification. And the consequences of this are poorly understood.
You see, surging energy demand is already proving a major headache for the early adopters.
As a state, California leads the world in the global race toward carbon neutrality. According to the Los Angeles Times, ONE IN FOUR new cars sold in California are now EVs. That’s an all-time high.
But California’s role as an early mover is presenting problems: A missing link if you like.
You see, the state’s power grid is buckling under the strain from enormous electricity demand.
The Wall Street Journal recently reported the problem is so badelectric powered trucking fleets have been forced to recharge vehicles with diesel generators. Yet the state government remains resolute, it wants half of heavy duty trucks to be EV by 2035.
But what happens to aging power grids during extreme weather events?
In places like California, heat waves over the summer strain power networks as consumers dial up air-conditioning units to escape the heat. And when millions of cars, trucks and businesses are added into the mix? Well, as an early adopter, California offers a case study for others to watch.
According to a report from Politico, 10 days of triple-digit temperatures across the state last year brought its power grid to the brink. In fact, investigations found that regulators were preparing forced blackouts right across California as a last-ditch solution in managing the state’s frail energy grid.
A state home to the mega-rich, the world’s largest tech firms — symbol of wealth and prosperity — could barely keep the lights on!
Moreover, forced blackouts could have been deadly for the sick and elderly relying on cooling and home medical equipment such as dialysis machines. These are the potential consequences of a poorly planned energy transition.
California is a poster child for the green energy movement, yet its experience points to a rather major flaw in the world’s attempt to reach net zero.
Power networks built during the ‘age of oil’ are NOT designed for mass electrification.
Investor angle
According to Bloomberg NEF, nations will need to spend at least US$21.4 trillion to upgrade their existing grid networks.
Power grids might not have the same appeal like a sleek Tesla or fast action lithium stock. But the potential windfalls from this mega trend should excite investors.
You could invest in the grid rebuild through utility stocks and engineering contractors. But leveraging into the raw materials in this US$21 trillion mega trend could be the best bet.
Thanks to its supreme ability to conduct electricity and form minute strands of wire, copper remains the key metal in electrification.
Things look increasingly optimistic for this metal too. You see, 2023 has been a year of poor sentiment for the sector.
A slowdown in Chinese housing construction, persistently high inflation, concerns of global growth and looming recession in the west.
The tidal wave of bad news should be sending copper prices lower. Yet, the commodity is up more than 7% over the last 12 months.
It means the window could be closing on steeply discounted copper plays.
Copper should be high on your list as a major investment theme over the coming years.